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Growth spreads beyond London as infrastructure boosts regions

Project starts saw double-digit growth once again on the back of a significant uplift in the private sectors, with regional activity picking up virtually across the board owing to a improvements in infrastructure.

The Glenigan index of project starts for the three months to March 2014 was up 15 per cent on March 2013, with private housing, civil engineering and private non-residential starts driving growth.

Glenigan index of project starts percentage change UK Mar 13-Mar 14

Source: Glenigan

There was weaker activity in education and health, but Glenigan economist Tom Crane is optimistic that the recent drop in education starts is temporary and that the sector will pick up due to the work available through the Priority School Building Programme and investment from universities.

Health and community & amenity starts have a more pessimistic outlook. “Public investment appears to be more on road, rail and infrastructure-led projects rather than on public services,” Mr Crane says.

Infrastructure drives regional growth

Regional activity is definitely gaining pace, with the value of project starts in Wales and the North-west growing by the fastest rate in March of all the UK regions. The value of starts grew by 48.6 per cent in the North-west, while Wales saw a 52.8 per cent rise owing to a depressed 2013.

“There is a fairly widespread growth year on year in the infrastructure sector, which is why around most of the UK there is a positive picture”

Tom Crane, Glenigan

Aside from the North-east, the West Midlands and Yorkshire & the Humber, all regions saw a strong level of growth last month. “In these regions, the upturn in private non-residential activity, particularly commercial, is not as strong as in others,” Mr Crane says.

Glenigan index of project starts percentage change by region March 2014

Source: Glenigan

“But there is a fairly widespread growth year on year in the infrastructure sector, which is why around most of the UK there is a positive picture.”

Further south, the East of England’s strong growth is largely due activity in the region’s housing market, alongside growth in commercial starts, with some particularly high-value hubs of activity in the Cambridge area.

Commercial gains

Across the UK, the value of office project starts grew by 34 per cent in March 2014.

Office demand is particularly strong in Scotland despite the potential uncertainty over the region’s future, Mr Crane says, with a healthy spate of activity in major cities such as Aberdeen, Edinburgh and Glasgow.

“It is currently one of the strongest office markets, with development last year picking up to 2007 levels,” he says. “There are high levels of demand in those major cities, and over the next three to six months that is likely to remain the case.”

Glenigan index of project starts percentage change London vs Scotland Mar 13-Mar 14

Source: Glenigan

In the South-east, commercial is expected to drive growth alongside private housing, with land prices expected to return to 2007 levels.

However, the significant rate of growth in London over the later part of 2013 is unlikely to be repeated, though activity in the capital will remain strong.

“There were lots of new projects last year, so this year we are not likely to see as large a rate of growth, but this is nothing to worry about in terms of new work [in London],” Mr Crane says.

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